Microsoft’s smartphone team is on its last legs

Is this the blue screen of death for Microsoft's phones? Photo: Microsoft

Microsoft may be doing great in some areas of its business, but it’s struggling in others — with “exhibit A” being its smartphone business.

Having sold off its feature phone business this month, Microsoft has now announced plans to “scale back” its smartphone output — which will impact “up to 1,850 jobs worldwide,” although Microsoft still claims it’s got some “great new devices” being developed for the future.

Check out Terry Myerson, Microsoft’s head of Windows’ message to employees:

“Team,

Last week we announced the sale of our feature phone business. Today I want to share that we are taking the additional step of streamlining our smartphone hardware business, and we anticipate this will impact up to 1,850 jobs worldwide, up to 1,350 of which are in Finland. These changes are incredibly difficult because of the impact on good people who have contributed greatly to Microsoft. Speaking on behalf of Satya and the entire Senior Leadership Team, we are committed to help each individual impacted with our support, resources, and respect.

For context, Windows 10 recently crossed 300 million monthly active devices, our Surface and Xbox customer satisfaction is at record levels, and HoloLens enthusiasts are developing incredible new experiences. Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same. Thus, we need to be more focused in our phone hardware efforts.

With this focus, our Windows strategy remains unchanged:

1. Universal apps. We have built an amazing platform, with a rich innovation roadmap ahead. Expanding the devices we reach and the capabilities for developers is our top priority.
2. We always take care of our customers, Windows phones are no exception. We will continue to update and support our current Lumia and OEM partner phones, and develop great new devices.
3. We remain steadfast in our pursuit of innovation across our Windows devices and our services to create new and delightful experiences. Our best work for customers comes from our device, platform, and service combination.

At the same time, our company will be pragmatic and embrace other mobile platforms with our productivity services, device management services, and development tools — regardless of a person’s phone choice, we want everyone to be able to experience what Microsoft has to offer them.

With that all said… I used the words “be more focused” above. This in fact describes what we are doing (we’re scaling back, but we’re not out!), but at the same time I don’t love it because it lacks the emotional impact of this decision. When I look back on our journey in mobility, we’ve done hard work and had great ideas, but have not always had the alignment needed across the company to make an impact. At the same time, Ars Technica recently published a long story documenting our journey to create the universal platform for our developers. The story shows the real challenges we faced, and the grit required to get it done. The story closes with this:

And as long as it has taken the company, Microsoft has still arguably achieved something that its competitors have not… It took more than two decades to get there, but Microsoft still somehow got there first.

For me, that’s what focus can deliver for us, and now we get to build on that foundation to build amazing products.

Terry”

This certainly isn’t the first time we’ve heard reports that Microsoft’s smartphone output is on its last legs. Last year, the company took a $7.6 billion write-down related to its acquisition of Nokia, alongside a restructuring charge of between $750 million to $850 million. In an email to employees at the time, CEO Satya Nadella wrote that Microsoft “in the near term … [will] run a more effective and focused phone portfolio.”